1. Field of Invention
The subject technology relates to managing claims payment transactions involving a third party administrator and a method for gathering, processing, disseminating, reconciling and controlling information relating to these payment transactions as utilized by a company such as a property and casualty insurance company.
2. Background of the Related Art
Most insurance companies pay some of their claims by utilizing outside third party adjusting or administration firms (individually, a “TPA” and collectively, “TPAs”). Typically, the insurance companies must give large escrow or suspense deposits to the TPAs, which are used for paying losses. Historically, TPAs make payment requests in one month and then the loss data supporting those payments and any other transactions, such as claims payment set-ups, closings, or reserve changes, are submitted to the insurance company the following month. In response, the insurance companies replenish the escrow accounts. As a result, large sums of capital are poorly deployed by being held in reserve in bank escrow accounts for use by the TPAs.
The insurance companies use the paid loss information supplied by the TPA to adjust their general ledger for paid loss activity. The work to fund the TPAs and record the paid losses is manual and does not allow detailed verification for every payment. Typically, the payment information is summarized and manually scanned, at best, for accuracy. Additionally, with the large escrows that must be maintained, the insurance company may end-up with a large credit exposure in the event of a default by the TPA. Further, a system without accurate tracking allows for clerical errors such as double payment and may tempt an unscrupulous TPA to improperly use or steal a portion of the escrow account. This process only becomes more complicated considering the fact that many large insurance companies use a plurality of TPAs to handle their books of business.